Edison Illuminating Company of Detroit, founded in 1886, and Peninsular Electric Light, founded in 1891, were the precursors to the Detroit Edison Company. In 1903 Detroit Edison's founders bought the securities of Edison Illuminating and Peninsular Electric Light and merged them as a subsidiary of the holding company North American Company. The result of this merger, the Detroit Edison Company, was incorporated later that same year, with Edison Illuminating as a subsidiary.

The consumer base it had acquired through Edison Illuminating had outgrown the company's power supply; thus one of the company's first objectives was to create additional generating capacity. Detroit Edison began to build the Delray power house in 1903. Detroit Edison also expanded through acquisitions; in 1905 the company purchased Washtenaw Light and Power Company, Michigan Milling Company, and Ann Arbor Agricultural Company. As a result of these acquisitions, the company owned the Argo, Barton, Geddes, and Superior generating dams on the Huron River. In 1906 Detroit Edison formed a wholly owned subsidiary, Eastern Michigan Edison Company, and transferred all the Huron River companies to it as subsidiaries.

Edison Illuminating distributed, sold, billed for, and collected on the energy produced by Detroit Edison from 1903 to 1915. In 1915 Detroit Edison began to serve its customers in these capacities directly. From that time, Edison Illuminating handled Detroit Edison's real estate. Detroit Edison continued to grow, and in 1919 the company bought Port Huron Gas and Electric Company.

In 1924 Detroit Edison built a plant at Trenton Channel in Trenton. This plant burned powdered coal, which created air pollution. The company decided to equip the plant with electrostatic precipitators to control the pollution. Detroit Edison continued to expand through the next decade, especially with regard to its service area. In 1936 the company bought the Michigan Electric Power Company, and with this purchase acquired even more service territory.

By 1954 the company was beginning to explore nuclear power options with a project named the Enrico Fermi Breeder Reactor Project. The Public Service Electric and Gas Co. of Newark, New Jersey, among thirty-three other companies, joined the project. In 1955 the project was officially organized and renamed the Power Reactor Development Company (PRDC), which owned and operated the Enrico Fermi Power Plant. In 1963 Fermi 1, the first commercial-sized fast breeder nuclear reactor, went into operation and began its first self-sustaining chain reaction.

The company continued to build its conventional generating capacity during this time. In the 1960s consumer demand threatened to exceed supply. In 1966 the company introduced peaking units into the generating system. Peaking generators burn gas and oil, are mobile, and can be brought on line in ten minutes. The next year, the Detroit Edison Company was reincorporated in Michigan. In 1968 the company requested its first electric rate increase in twenty years, to help meet the expenses of building generating capacity.

Fermi 1 experienced problems, including damage from a broken device in the reactor. In 1975 the plant was decommissioned by the PRDC. The 1970s were difficult years for Detroit Edison, as the nation experienced an economic recession and the demand for energy dropped. During 1974 the company temporarily suspended all power plant construction and environmental modifications.